Beer Loses Fizz as Spirits Gain Popularity: Top 10 Stocks to Buy

6. The Boston Beer Company, Inc. (NYSE:SAM)

Number of Hedge Fund Investors  in Q1 2024: 26

The Boston Beer Company, Inc. (NYSE:SAM), as the name suggests, is a beer company headquartered in Boston. It has a diversified product portfolio which also includes flavored malt and hard seltzers. This means that if the beer market continues in its downturn, The Boston Beer Company, Inc. (NYSE:SAM) will be able to shift away to other alcoholic products particularly sweet drinks that are popular with young users. It operates primarily through a warehouse distribution model, which lets it ship large volumes but also leaves it vulnerable to the effects of bullwhip fluctuations within the supply chain. This can result in The Boston Beer Company, Inc. (NYSE:SAM) producing products at a time when distributors are already stock – leading to high working capital costs that are difficult to recover.

SouthernSun Asset Management commented about The Boston Beer Company, Inc. (NYSE:SAM) in its Q1 2024 investor letter. Here is what the firm said:

“The Boston Beer Company, Inc. (SAM), a leading provider of alcohol beverages, was one of the top detractors in the SMID Cap strategy in the first quarter. The company reported a modest revenue decline (on a comparable basis) for 2023, with strong growth in the Twisted Tea brand offset by declines in the Truly brand. Margins expanded during the year, including in the fourth quarter, as the company benefited from operational margin improvement initiatives, as well as deflation in freight costs. The company expects slight sales growth at the midpoint of its guidance and continued margin expansion in 2024. Concurrent with its fourth quarter earnings announcement, the company announced the retirement of CEO Dave Burwick and his replacement with former Nike executive and current SAM board member Michael Spillane. We expect no change in the company’s strategy or its capital allocation from this leadership change. In the near term, we believe the company will remain focused on sustaining Twisted Tea’s growth, turning Truly volume trends, improving operations to enhance gross margins, and thus providing more funds to invest in its core assets as a company – its brands and its sales force. Overall, we remain confident management’s efforts and investments are likely to produce profitable growth that will reward investors over time.”